Binance Offering U.S.-style Bitcoin Options Contracts
Confirming hints from earlier in the month, on April 13th, one of the top cryptocurrency exchanges, Binance launched Bitcoin options on its futures trading platform. For the time being, it will only be limited to the exchange’s when used via the mobile app.
The options contracts offer traders an opportunity to buy either a call option (right to buy) or a put option (to sell) for a given asset at a specifically defined “strike price.” They are offering the “American” approach (rather than the European one) where traders can settle the contract at the “strike price” chosen at any point in time before the expiry date itself.
For Binance’s BTC/Tether (USDT) options contracts, traders would first transfer their USDT holdings from their spot wallet to a futures wallet. They would then choose an expiry date which can have a range of anywhere between 10 minutes to one day.
Binance indicates in a note to readers that the fixed value premium has to be paid right off the bat so that any prospective profits on trades will be net (profits minus premium). However, the exchange does issue a caution indicating that there are no guarantees that your purchase will garner a profit once the premium has been deducted, and that most options purchases will end up not being profitable, while a minority will be very profitable. Investors were encouraged to act at their own discretion.
Options Contracts In the Crypto-Space
Back in December 2019, Malta-based cryptocurrency exchange OKEx already launched their version of Bitcoin options trading for a small group of traders. They formally launched the platform earlier in 2020.
Additionally, back in September 2019, the Chicago Mercantile Exchange Group announced plans to launch a product of their own option for Bitcoin futures. They indicated later that they were expecting high demand in this venture specifically from Asia.
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